A. The United States' Claims Against AMC.

movie theaters so they are accessible to persons with disabilities; (2) failing to make alterations

to movie theaters so they are accessible to persons with disabilities; and (3) operating movie

theaters in a manner that denies persons with disabilities equal access to the goods, services,

facilities, privileges, advantages, and accommodations offered by those theaters. Under its first

two claims, the United States will show that AMC's theaters do not comply with certain Justice

Department regulations known as the Standards for Accessible Design, 28 C.F.R. pt. 36,

Appendix A (the "Standards").1 The Standards set out hundreds of specific architectural

requirements applicable to movie theaters and other places of public accommodation. A key

issue in the United States' first two claims is AMC's failure to comply with Standard 4.33.3 — a

Justice Department regulation that governs the placement of wheelchair seating in movie

theaters.

Standard 4.33.3 is a regulation that was promulgated by the Justice Department in 1991

following notice and comment rulemaking. Pursuant to 42 U.S.C. § 12183(a)(1), all theaters

designed and constructed for first occupancy after January 26, 1993, are required to comply

with the requirements of Standard 4.33.3. Among other things, Standard 4.33.3 requires movietheaters to provide wheelchair seating areas that are "an integral part of any fixed seating plan"

and "provide people with physical disabilities ... lines of sight comparable to those for members

1 AMC erroneously refers to the Standards as the "ADAAG." However, the term"ADAAG" properly refers to the Americans with Disabilities Act Accessibility Guidelines forBuildings and Facilities, a regulation promulgated by the Architectural and TransportationBarriers Compliance Board (the "Access Board"). 36 C.F.R. pt. 1191. Under the ADA, theregulations promulgated by the Justice Department must be consistent with, but are not requiredto be identical to, the regulations promulgated by the Access Board. See 42 U.S.C. § 12186(c).In 1991, the Department adopted the ADAAG as the Department's Standards. The distinctionbetween the ADAAG and the Standards is important because the Justice Department adoptedonly the plain language of the ADAAG — not the Access Board's Preamble to or interpretationsof the ADAAG.of the general public."2 In addition, in theaters with seating capacities greater than 300,

public." That contention is based on a plain language interpretation of Standard 4.33.3.

Wheelchair areas shall be an integral part of any fixed seating plan and shall be provided so as to provide people with physical disabilities a choice of admission prices and lines of sight comparable to those for members of the general public. They shall adjoin an accessible route that also serves as a means of egress in case of emergency. At least one companion fixed seat shall be provided next to each wheelchair seating area. When the seating capacity exceeds 300, wheelchair spaces shall be provided in more than one location. Readily removable seats may be installed in wheelchair spaces when the spaces are not required to accommodate wheelchair users.

EXCEPTION: Accessible viewing positions may be clustered for bleachers,

balconies, and other areas having sight lines that require slopes of greater than 5 percent. Equivalent accessible viewing positions may be located on levels having accessible egress. In response to the United States' lawsuit, AMC filed a counterclaim and an affirmative

1158, 1184 (9th Cir. 1997) ("Negotiations, which are not final actions, therefore

are not reviewable, and we decline to consider them").

Order at 13-14.

C. AMC's Motion to Compel Discovery.

On December 7, 1999, AMC filed a motion to compel discovery from plaintiff United

States. Through its motion, AMC sought discovery to renew its APA counterclaim. The parties

briefed the motion extensively, submitting more than 135 pages of briefing for Magistrate

Judge Hillman's review. A hearing of the motion was held on January 11, 2000. At the hearing,

which was primarily held off the record, the Magistrate Judge issued tentative rulings on certain

issues3 and advised the parties that AMC's discovery would be limited by Judge Morrow's

December 17th Order, which was the law of the case. Following the Magistrate Judge's

statement of his tentative rulings, the United States voluntarily agreed to disclose most of the

information that would be responsive to Interrogatories # 5 and # 6. However, the United

States was unwilling to disclose were communications that occurred in the course of settlement

negotiations between the Justice Department and persons and entities other than AMC, and (2)

communications that occurred in the course of the United States’ investigation of entities other

than AMC.4 Following the hearing, the Magistrate Judge ordered the parties to submit

additional briefing on the issue of whether AMC should be permitted to obtain discovery

regarding the United States' settlement negotiations with movie theater industry members other

than AMC and the applicability of the law enforcement and investigative privilege. The parties

submitted another 20 pages of briefing for the Magistrate Judge's review. On February 25,2000, after reviewing both sets of briefing by the parties, the Magistrate Judge issued a Minute

Order in which he required the United States to provide certain additional discovery but denied

3 Among other things, the Magistrate Judge indicated that his tentative position was thatAMC was not entitled to discovery into issues relating to stadiums as opposed to issues relatingto stadium-style theaters. Although that ruling has not been finalized and, thus, is not yet ripe forreview, AMC attempts to raise it in its motion for reconsideration. 4 The Department did not agree to reveal attorney’s notes or thoughts about suchcommunications, since those notes and thoughts are plainly protected by the work productdoctrine.AMC's requests for discovery into the United States' settlement negotiations with entities other

than AMC. AMC now seeks reconsideration of the Magistrate Judge's February 25th Order.5

ARGUMENT

A. Standard of Review.

AMC may not obtain reversal or modification of Magistrate Judge Hellman's ruling in

this matter unless it was “clearly erroneous or contrary to law.” See Fed. R. Civ. P. 72(a); see

also 28 U.S.C. § 636(b)(1)(A) (district court may review magistrate judge’s order if it is “clearly

erroneous or contrary to law.”); Local Rules, Chapter V, Rule 3.3.1. “To conclude that a

magistrate judge’s decision is clearly erroneous, the district court must arrive at a ‘definite and

Chemical Co., 503 F.2d 654, 658 (7th Cir. 1974).

applied the ruling in Contra Costa to determine the same question that is before the Court in

this case. In Cook, former employees who were suing their employer for sexual harassment

sought discovery of documents reflecting statements made during the course of settlement

negotiations between the employer and the attorney representing a supervisor who had been

terminated in connection with activities relating to the employees’ sexual harassment claims.

The employees sought to discover correspondence between the employer and the supervisor’s

attorney that occurred in the course of settlement negotiations. The employees argued that the

discovery was relevant because it was likely to contain information regarding the veracity of

the employees’ claims, to show bias by the supervisor when he testified at trial, and that it was

unfair to allow the employer to use the supervisor’s termination as evidence that the employer

had acted to prevent harassment without allowing the employees to discover the circumstances

of the termination. Cook, 132 F.R.D. at 553. The District Court for the Eastern District of

California denied the discovery, holding that statements made in settlement negotiations are

entitled to protection under a right to privacy. Id. at 553. The court held that settlement

negotiations are conducted in privacy with the expectation that they will not be disclosed topersons who are not parties to those negotiations. Id. Rejecting the employees’ arguments that

the private nature of the discussions would make them more likely to reveal information helpful

to the employees’ case, the court concluded that “it would be perverse logic to hold that the

more private one expects discussions to be, the more releasable is the content of those

discussions.” Id.

In addition to holding that the settlement negotiations were protected by privacy rights,

the Cook court also held that information relating to settlement negotiations was protected by

the “well established privilege relating to settlement discussions.” Id. The court reasoned: Thus, while it is true that Rule 408 is addressed to the inadmissibility of evidence at trial and generally pertinent to the inadmissibility of compromise material to prove damages or liability in the claim of origin, ‘the same consideration of policy which actuates the courts to exclude an offer of compromise made by [the defendant to the plaintiff], also apply to settlement [negotiations between the defendant and a third party.] * * * In this regard, the court finds that one consideration in precluding the discovery of documents generated in the course of settlement discussions lies in the fact that such discussions are frequently not the product of truth seeking. Settlement negotiations are typically punctuated with numerous instances of puffing and posturing since they are ‘motivated by a desire for peace rather than from a concession of the merits of the claim.’ ... What is stated as fact on the record could very well not be the sort of evidence which the parties would otherwise actually contend to be wholly true. That is, the parties may assume disputed facts to be true for the unique purpose of settlement negotiations. The discovery of these sort of ‘facts’ would be highly misleading if allowed to be used for purposes other than settlement.Id. at 554 (citing Contra Costa, 678 F.2d at 92, and Wyatt v. Security Inn Food & Beverage, Inc.,819 F.2d 69, 71 (4th Cir. 1987)). See also Bank of America Nat’l Trust & Savings Ass’n v. HotelRittenhouse Assoc., 800 F.3d 339, 345 (3d Cir. 1986) (noting “confidentiality ordinarilyaccorded to settlement agreements” that do not formally use the judicial process); Butta-Brinkman v. FCA Int’l, Ltd., 164 F.R.D. 475, 477 (N.D. Ill. 1995) (holding that the defendant isnot required to turn over information relating to settlement negotiations unless it is relevant andunless the party seeking the information can show that it cannot be obtained by other means);Lesal Interiors, Inc. v. Resolution Trust Corp., 153 F.R.D. 552, 562 (D. N.J. 1994) (requiring amore particularized showing that evidence is relevant and calculated to lead to the discovery ofadmissible evidence in the context of settlements); Serina v. Albertson’s, 128 F.R.D. 290, 293(M.D. Fla. 1989) (courts have long recognized Fed. R. Evid. 408's policy of encouragingsettlement in creating a particular standard to govern discoverability of settlement materials);Bottaro v. Hatton Assocs., 96 F.R.D. 158, 160 (E.D. N.Y. 1982) (privilege for settlementdocuments is to recognize “the strong public policy in favoring settlements”); Olin Corp. v.Insurance Co. of North Am., 603 F. Supp. 445, 449-50 (S.D. N.Y. 1985) (same); City of Grotonv. Connecticut Light and Power, 84 F.R.D. 420, 423 (D. Conn. 1979); UMC/Stamford, Inc. v.Allianz Underwriters Ins. Co., 647 A.2d 142 (N.J. Sup. 1994) (holding that ordering disclosureof settlements would not only jeopardize those settlements but would chill and deter otherparties from entering into confidential discussions to settle their disputes without a lengthytrial.”). Cf. Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164, 1171(C.D. Cal. 1998) (finding that “information exchanged in confidential mediation, like any otherinformation,” is subject to discovery rules, “at least where jurisdiction is premised on a federalquestion and the material sought in discovery is relevant to the federal claims presented” butallowing discovery of settlement negotiations when they are calculated to lead to the discoveryof admissible evidence); Oliver v. Committee for the Re-Election of the President, 66 F.R.D.553, 556 (D. D.C. 1975) (although declining to recognize a settlement privilege, finding thatinformation requested regarding settlement was neither relevant nor reasonably calculated tolead to admissible evidence). AMC suggests that Fed. R. Evid. 408 and the Ninth Circuit's opinions in Brocklesby v.United States, 767 F.2d 1288, 1292-93 (9th Cir. 1995), cert denied, 474 U.S. 1101 (1986), andHudspeth v. Commissioner, 914 F.2d 1207, 1214 (9th Cir. 1990), should be read to permitroutine discovery into settlement negotiations because they expressly recognize a few limitedinstances where evidence relating to settlement agreements could be admissible for the limitedpurpose of proving the bias or prejudice of a witness. AMC Mem. at 7. However, the possibleadmissibility of settlement agreements in limited circumstances for the purpose of showing biasor prejudice does not equate to invasive discovery into all settlement negotiations. Here, AMCdoes not contend and, indeed, cannot contend that it seeks discovery into the Government'ssettlement negotiations for the purpose of obtaining evidence of bias or prejudice or for thepurpose of obtaining any other evidence that would be admissible under Fed. R. Evid. 408.Instead, AMC openly admits that it seeks discovery of information for use in proving theinvalidity of the United States' claims -- i.e., evidence to support its APA defense (and to renewits dismissed APA counterclaim) alleging that the United States is allegedly applying a secretpolicy industry-wide through settlement negotiations and evidence to support its reliancedefense in which it claims that, in designing its theaters, AMC allegedly relied on statementsallegedly made by the Government during settlement negotiations with entities other than AMC.Both types of information would be inadmissible under Fed. R. Evid. 408, since they wouldoffered to prove the validity or invalidity of a claim. Thus, the evidence that AMC seeks wouldnot be admissible under Fed. R. Evid. 408. Contra Costa, 678 F.2d at 91.

2. The Discovery Sought by AMC Is Not Relevant and Does Not

Warrant Intrusion into Confidential Settlement Negotiations.

AMC argues that the Court should ignore all of the cases supporting Magistrate Judge

Hellman's ruling and instead follow the dictates of other cases holding that discovery of

settlement negotiations should be permitted when it may lead to relevant evidence. But AMC's

reliance on these cases is unavailing. AMC ignores the law of the case, which has already

established that settlement negotiations and stadium cases are simply not relevant to AMC's

APA-based arguments in this action.

In her December 17th Order dismissing AMC's counterclaim, Judge Morrow established

the law of the case as to AMC's challenges of Justice Department action under the APA. First,the Judge held that "Neither settlement negotiations nor threats of suit constitute final agency

action that may be judicially reviewed." Order at 12. Second, the Judge rejected AMC's APA-

based argument that the United States had adopted a secret law that it was imposing on the

theater industry through settlement negotiations.6 Order at 13-14. Under these two rulings,

6 AMC cites to an oral ruling by Judge Morrow during the August 9, 1999 hearing on theUnited States' motion to dismiss AMC's counterclaim to suggest that adopting an industry wideposition in settlement negotiations could be final agency action. AMC Mem. at 8. However,AMC ignores Judge Morrow's later written order, which reverses her August 9 oral ruling.December 17th Order at 17 ("On August 27, 1999, AMC filed a supplemental declarationproffering the additional evidence it had been able to obtain concerning DOJ’s action. . . ."); Id.at 16-17 ("The additional evidence proffered by AMC is not sufficient to demonstrate that DOJJudge Morrow made clear that AMC cannot rely on Justice Department statements during

settlement negotiations as the basis for an APA challenge to this enforcement action.

Accordingly, under the law of the case, the United States' settlement negotiations with other

members of the movie theater industry or any other industry are simply not reasonably

calculated to lead to the discovery of admissible evidence and, thus, are not permitted areas of

discovery under Fed. R. Civ. P. 26(b)(1).7

AMC argues that it is entitled to discovery into settlement negotiations because it mayhave relied on such statements when it designed its theaters. At the January 11, 2000 hearingon AMC's motion to compel, the Magistrate Judge rejected this argument for two reasons.First, AMC did not argue good faith reliance as a basis for discovery into settlementnegotiations when it originally briefed its motion to compel. Thus, that argument was waived.Second, the Magistrate Judge agreed with the United States' view that, if AMC had actuallyrelied on statements made by the United States during settlement negotiations, it wouldnecessarily know about such statements and would not need to discover them from the United

has taken an industry-wide position like that the agency in National Union AutomaticLaundry took by sending an opinion letter to an industry trade association. See National UnionAutomatic Laundry, supra, 443 F.2d at 701-02. To the contrary, the evidence before the courtsuggests that, at most, DOJ has communicated with ten members of the theater industrynationwide, and has not sought to press its interpretation of Standard 4.33.3 uniformly evenamong the largest owners. Consequently, the court concludes the evidence does not establishthat DOJ has engaged in final agency action.”). 7 Judge Hillman's Minute Order denied AMC discovery relating to the United States'communications (and settlement negotiations) with stadium owners and operators and witharchitects relating to issues involving lines of sight in stadiums — not lines of sight in movietheaters. Judge Hillman's ruling is consistent with Judge Morrow's December 17th Order, whichheld that “[u]nlike the Department’s interpretation of the line of sight requirement at issue inCaruso and Independent Living [two cases involving stadiums], the interpretation it seeks toenforce in this action has not been the subject of any official statement of policy or positionequivalent to the [Technical Assistance Manual] Supplement [struck down in those two cases].Rather, AMC contends that DOJ has taken final agency action by filing an amicus brief, sendingprivate communications to theater owners, and threatening to initiate and in fact initiatinglitigation against some of them. Consequently, the 1994 TAM Supplement cases do not controldecision of the issues raised in DOJ’s motion to dismiss.” Dec. 17th Order at 9.States. Permitting AMC to discover statements that it does not know about simply does notmake sense in the context of a reliance claim, since AMC cannot have relied upon statementsunless it knew about them. Moreover, the statements that AMC seeks to discover arestatements made in 1998 and 1999 — statements made years after AMC decided to buildstadium-style theaters. AMC obviously could not have relied on statements made to theaterowners during settlement negotiations when those statements were made after many of AMC'sstadium-style theaters were already built. Public policy considerations also support affirmance of the Magistrate Judge's ruling.Whenever possible, the Civil Rights Division attempts to resolve matters through informalsettlement negotiations before instituting litigation to compel compliance with ADArequirements. As a result of this policy, most ADA violations uncovered through JusticeDepartment investigations do not require recourse to litigation. Balanced against the publicpolicy favoring the protection of the confidentiality of settlement negotiations and the CivilRights Division’s policy of pursuing alternate dispute resolution before filing suit to enforce itsclaims is AMC’s alleged "need" for the discovery it seeks — a need that AMC has not shown.First, as the Court noted in its December 17th Order, the Department’s statements in privatecommunications with other members of the motion picture theater industry are “are not thekind of actions that are subject to judicial review under the APA,” December 17, 1999 Order at14, 9, and 8. Thus, these communications are not discoverable under AMC’s APA-basedaffirmative defense and/or counterclaim. Second, under Fed. R. Evid. 408, communicationsthat occurred during settlement negotiations (such as the Department’s offers to compromise itsclaims by allowing a theater owner to provide certain lines of sight for wheelchair seatinglocations) “‘are ‘not admissible to prove liability for or invalidity of the claim.’” Contra Costa,678 F.2d at 92 (quoting Fed. R. Evid. 408). Thus, even if AMC obtained discovery regardingsettlement negotiations, it could not use them to prove or disprove the validity of any claim. Id.Third, the communications at issue occurred long after AMC designed the theaters at issue inthis case. Thus, notwithstanding AMC’s arguments to the contrary, AMC simply cannot arguethat it relied on such communications when it made design decisions about its theaters or thatthese communications bear any relevance to AMC’s understanding of the requirements ofStandard 4.33.3. Fourth, the identity of the persons who participated in settlement negotiationsis not relevant either, since naming such persons would simply be a predicate to AMC’s effortsto seek information about those settlement negotiations from the persons named — again,evidence that is not relevant. Fifth, the evidence that AMC seeks — evidence about theDepartment’s interpretation of Standard 4.33.3 is available from other sources that have alreadybeen disclosed to AMC. The Department has provided AMC with all briefs it has fileddiscussing the application of Standard 4.33.3 to movie theaters, copies of all technicalassistance materials it has prepared on the subject, copies of all settlement agreements it hasreached with any movie theater owners and operators, and copies of all correspondence tomembers of Congress and other members of the public inquiring about the application ofStandard 4.33.3 to movie theaters. Thus, AMC has no need to know what negotiating positionsthe Justice Department has taken in its settlement negotiations with other theater operators. Seealso Schachter v. United States, 1994 WL 327696 at *1 (N.D. Cal. Apr. 12, 1994) (holding that,in determining whether the interpretation of a statute is correct, “the court need only look to theface of the statute and the regulation”).

C. The Magistrate Judge's Order Is Appropriate on Other

Grounds As Well.

While the Magistrate Judge denied AMC the discovery it seeks because it involvesconfidential settlement negotiations that are not admissible under Fed. R. Evid. 408, the

discovery could have been denied on other grounds as well.

In addition to asserting the confidentiality of settlement negotiations, the United States

was also unwilling to disclose the information sought by AMC because it is protected by the

law enforcement and investigative privilege.8 The law enforcement and investigative privilege

8 The Department invoked the law enforcement investigative privilege in answers tointerrogatories, in answers to requests for production of documents, and by filing the Declarationof Acting Assistant Attorney General Bill Lann Lee. See Declaration of Bill Lann Lee at ¶ 21(appended hereto as Exh. B); see excerpts from Pl.’s Resps. and Objections to Def.’s First Set ofInterrog. at 3 and excerpts from Pl.’s Resps. and Objections to Def.’s First Set of Requests forProduc. of Docs. at 2 (appended as Exh. C). Acting Assistant Attorney General for the Civilprotects the government from the disclosure of information that would harm an agency’s law

investigation, see Church of Scientology v. United States Internal Revenue Serv., 995 F.2d 916,

920 (9th Cir. 1993) (noting that the courts are to consider invasion of privacy in evaluating

claim of investigative privilege).10

Rights Division Bill Lann Lee is the appropriate person to assert this privilege, as he is “the headof the department [here, the Civil Rights Division] having control over the requestedinformation.” See Tuite v. Henry, 98 F.3d 1411, 1417 (D.C. Cir. 1996). In Tuite, the Court foundthe law enforcement privilege had been properly invoked by Michael Shaheen, counsel for theOffice of Professional Responsibility (OPR), a component of the Department of Justice. See id.at 1413, 1414, 1417. See also United States v. Rozet, 183 F.R.D. 662, 666 (N.D. Cal. 1998)(finding that the acting head of an agency “is precisely the appropriate person to invoke theprivilege, and has full authority to do so”). At the January 11th hearing, Magistrate JudgeHellman stated his tentative ruling that the Department had properly invoked the privileges it wasasserting. 9 “It makes little sense to protect the actual files from disclosure while forcing thegovernment to testify about their contents.” In re Sealed Case, 856 F.2d at 271. 10 The law enforcement and investigative privilege applies in civil cases as well ascriminal cases. In re Sealed Case, 856 F.2d at 271 (the law enforcement and investigativeprivilege protects “the public interest in safeguarding the integrity of ongoing civil and criminalinvestigations”); see also 12 Fed. Proc. § 33.306 (1988) (treatise observing that “[t]he [common-law]privilege is most often invoked as to investigative materials compiled in connection withthe civil or criminal law enforcement efforts of the Justice Department and FBI”). In the FOIAcontext, the Ninth Circuit has held that the investigative files exemption applied to “civil as wellas criminal law enforcement activities.” Church of Scientology, 995 F.2d at 919 (9th Cir. 1993)(quoting National Policy Review on Race & Urban Issues v. Weinberger, 502 F.2d 370, 373(D.C. Cir. 1974)); see also Stern v. FBI, 737 F.2d 84, 88 (D.C. Cir. 1984) (FOIA’s lawenforcement exemption applies to “enforcement of both civil and criminal federal law”). Since the Justice Department does not have subpoena power in its investigations under

the ADA, it must rely on the cooperation of persons and entities under investigation when it is

gathering evidence to determine if they are in compliance with ADA requirements. To

encourage such cooperation, it is the Justice Department's policy to maintain the confidentiality

of persons and entities under investigation for ADA violations unless it is necessary to file a

now decide whether Dow has identified 'final' EPA action over which we have jurisdiction"). In

determining whether it has jurisdiction over AMC's counterclaim, the court has considered thedeclarations and other evidence filed by the parties. B. The Administrative Procedures Act Under the APA, agencies must give notice and seek comment before formulatingsubstantive regulations. See 5 U.S.C. §§ 553(b), (c) ("General notice of proposed rule makingshall be published in the Federal Register. . . . After notice required by this section, the agency

30 Section 704 provides for review of "[a]gency action made reviewable by statute and finalagency action for which there is no other adequate remedy in a court . . ." See 5 U.S.C., §704.Here, neither party contends that a specific statute authorizes review of DOJ's interpretative andenforcement activities.shall give interested persons an opportunity to participate in the rule making through submissionof written data, views, or arguments with or without opportunity for oral presentation"). See alsoParalyzed Veterans of America v. D.C. Arena, L.P., 117 F.3d 579, 586 (D.C.Cir. 1997). Thesenotice and comment requirements apply only to "legislative" or "substantive" rules; they do notapply to "interpretative rules, general statement of policy, or rules of agency organization,procedure, or practice." 5 U.S.C. § 553(b). See McLouth Steel Products Corp. v. Thomas, 838F.2d 1317, 1320 (1988); Community Nutrition Institute v, Young, 818 F.2d 943, 945-46 (1987)(per curium). What constitutes a "substantive rule" is not defined in the APA. The Supreme Court hasnoted, however, that one characteristic inherent in the concept is that the regulation must "affect[]individual rights and obligations." Morton v. Ruiz, 415 U.S. 199, 232 (1974). "This characteristicis an important touchstone for distinguishing those rules that may be 'binding ' or have the 'forceof law.'" Chrysler Corp. v. Brown, 441 U.S. 281, 301 (1979) (quoting Morton, supra, 415 U.S. at235). Substantive rules "effect a change in existing law or policy." Powderly v. Schweiker, 704F.2d 1092, 1098 (9th Cir. 1983). Interpretive rules, by contract, "merely clarify or explainexisting law or regulations." Id. AMC's counterclaim charges that DOJ's new interpretation ofStandard 4.33.3 constitutes substantive rulemaking. Because DOJ did not give notice or seekcomment prior to adopting the alleged new rule, AMC asserts the APA has been violated. C. Final Agency Action Whether AMC's claim in this regard can be heard depends in the first instance on whetherDOJ's interpretation constitutes "final agency action." See 5 U.S.C. § 704; Gallo, supra, 159 F.3dat 1198-99. The Ninth Circuit has directed that this finality requirement be interpreted in a"pragmatic" and "flexible" way. Dietary Supplemental Coalition, Inc. v. Sullivan, 978 F.2d 560,562 (9th Cir. 1992). See Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967); Acura ofBellevue v. Reich, 90 F.3d 1403, 1408 (9th Cir. 1996). Generally, administrative orders are notfinal and reviewable "unless and until they impose an obligation, deny a right, or fix some legalrelationship as a consummation of the administrative process." Ukiah Valley Medical Center v.FTC, 911 F.2d 261, 264 (9th Cir. 1990) (quoting Chicago & Southern Air Lines, Inc. v. WatermanS.S. Corp., 333 U.S. 103, 113 (1948)); Air California v. United States Dep't of Transportation,654 F.2d 616, 621 (9th Cir. 1981) (same). Thus, when an action is not a "definitive" statement ofthe agency's position and does not have a "direct and immediate . . . effect on the day-to-daybusiness" of a party, it is not "final." Air California, supra. See also Williamson County RegionalPlanning Comm'n v. Hamilton Bank, 473 U.S. 172, 193 (1985) ("the finality requirement isconcerned with whether the initial decision-maker has arrived at a definitive position on the issuethat inflicts an actual, concrete injury. . ."). Other relevant factors in assessing finality include whether the action has the status of law

or comparable legal force, and whether immediate compliance with its terms is expected. See

DOJ's amicus brief in Lara, its private correspondence with theater owners around the country,

and its initiation of litigation against certain of them do not have these indicia of finality.

1. The 1994 TAM Supplement Cases

In arguing that DOJ's interpretation of Standard 4.33.3 constitutes final agency actionsubject to review, AMC relies heavily on two cases that examined the Department's interpretationof the line of sight requirement in connection with seating arenas and stadia. In each case, aprivate stadium owner challenger the agency's attempt to enforce a requirement that wheelchairlocations be sufficiently elevated that their occupants could see over spectators standing in frontof them. This requirement was set forth in the 1994 Supplement to the DOJ's TechnicalAssistance Manual ("1994 TAM Supplement"). Because the interpretation constituted afundamental change in the agency's prior interpretation of Standard 4.33.3, and because DOJ hadadopted the 1994 TAM Supplement without notice and comment, both decisions cited by AMCheld it was invalid. See Caruso v. Blockbuster-Sony Music, 174 F.3d 166, 177 (3rd Cir. 1998);Independent Living Resources v. Oregon Arena Corp., 982 F.Supp. 698, 758 (D.Or. 1997). Butsee Paralyzed Veterans, supra, 117 F.3d at 587 (holding that DOJ had not previously adopted anauthoritative positive on the issue, and thus that the 1994 TAM Supplement was an interpretativerule that could be adopted without notice and comment). Neither Caruso nor Independent Living addressed the issue presently before the court,i.e., whether DOJ's interpretation of Standard 4.33.3 was final agency action that could bejudicially reviewed under the APA. All parties apparently agreed that the Department's issuanceof the 1994 TAM Supplement constituted final agency action; their disagreement concernedwhether requiring a line of sight over standing spectators constituted a substantive orinterpretative rule. See Caruso, supra, 174 F.3d at 174 (finding that DOJ violated the APAbecause the "agency [knew] it [was] promulgating a rule [Standard 4.33.3] that [was] ambiguouson a substantive issue of concern to commentators [whether lines of sight over standing spectatorswere required], and later trie[d] to resolve the issue through an interpretive rule [the 1994 TAMSupplement]"); Independent Living, supra, 982 F.Supp. at 737 (holding that "the interpretation ofStandard 4.33.3 expressed in the 1994 TAM Supplement is an attempt to impose a newsubstantive obligation, which may not be accomplished under the rubric of an 'interpretiveregulation'"). Unlike the Department's interpretation of the line of sight requirement at issue inCaruso and Independent Living, the interpretation it seeks to enforce in this action has not beenthe subject of any official statement of policy or position equivalent to the TAM Supplement.Rather, AMC contends that DOJ has taken final agency action by filing an amicus brief, sendingprivate communications to theater owners, and threatening to initiate and in fact initiatinglitigation against some of them. Consequently, the 1994 TAM Supplement cases do not controldecision of the issues raised in DOJ's motion to dismiss. 2. The Lara Amicus Brief

In its brief in Lara, the Department noted that it was "participating as Amicus curiae . . .

to provide the Court with the United States' interpretation of the American with Disabilities Act .

. . and its implementing regulations."31 After asserting that its views were entitled to deference,32

DOJ argued:

31 Declaration of Gregory F. Hurley in Opposition to Motion to Dismiss Counterclaim("Hurley Decl."), Ex. E at 2.32 21 Id. "Once measured, the lines of sight provided to wheelchair users must be

comparable to those provided to members of the general public. "Comparable" is

an ordinary word used in everyday parlance. . . . Consistent with this practical

definition, the Department of Justice interprets the language in the Standards

requiring 'lines of sight comparable to those for members of the general public' to

mean that in stadium style seating, wheelchair locations must be provided lines of

sight in the stadium style seats within the range of viewing angles as those offered

to most of the general public in the stadium style seats, adjusted for seat tilt.

Wheelchair locations should not be relegated to the worst sight lines in the building,

but neither do they categorically have to be the best. . . . In other words, to ensure

that wheelchair users are provided lines of sight that are comparable to the viewing

angles offered to the general public, the lines of sight provided to wheelchair users

should not be on the extremes of the range offered in the stadium. As described in

complaint does not constitute a final agency decision since it does not effect a final disposition,

33 Id. at 8-9. Earlier in the brief, DOJ discussed a publication of the Society of MotionPicture and Television Engineers ("SMPTE") titled Engineering Guideline Design of EffectiveCine Theaters, EG 18-1994 ("the SMPTE Guideline"). (Id. at 3-3.) It is this industry standard towhich the last quoted sentence apparently makes reference. DOJ asserts that it did not adopt theSMPTE Guideline in the Lara brief, and that it has not adopted it as the Department'sinterpretation of Standard 4.33.3.but merely permits litigation); Board of Trade of the City of Chicago v. SEC, 883 F.2d 525, 529-

any comparable effect upon [defendant's] daily business." Standard Oil, supra, 449 U.S. at 242.See also Ukiah Valley Medical Center, supra, 911 F.2d at 264 (the burden of having to defend

administrative suits has "consistently been held not to constitute a 'direct and immediate . . . effect

on the day-to-day business' of charged parties"). This is particularly true since the Lara court

declined to adopt the interpretation of Standard 4.33.3 espouse in DOJ's amicus brief. The filing

of the brief and articulation of an interpretation of Standard 4.33.3, therefore, did not constitute

final agency action subject to judicial review.

3. Settlement Communications And Threats of Litigation

As further evidence of final agency action, AMC points to DOJ's correspondence withtheater owners since Lara. It asserts that in these private communications DOJ has advanced theinterpretation of Standard 4.33.3 it articulated in Lara, and has threatened to sue theater ownerswho decline to abide by it. Neither settlement negotiations nor threats of suit constitute finalagency action that may be judicially reviewed. See New Jersey Hospital Ass'n. v. United States,23 F.Supp.2d 497 (D.N.J. 1998) ("The question then becomes whether the actions of the DOJ inproviding settlement letters to plaintiff's member hospitals constitute final agency action, forwhich there is no other adequate remedy in a court. . . . .This Court finds that the DOJ's actionsare not final, [and] that plaintiff has available to it other adequate remedies in a court. . .") DuvalRanching Co. v. Glickman, 965 F.Supp. 1427, 1440 (D.Nev. 1997) ("Finally, there is no evidencethat Defendants have ever attempted to enforce any regulations against any of the namedPlaintiffs. . . . Mere threats are not final action. In Ukiah Valley Medical Center the Ninth Circuitheld that the filing of a complaint by an administrative agency is not 'final' for purposes ofjudicial review. . . . A fortiori, threatening to file a complaint, threatening to initiate criminalproceedings, or threatening to sue, are also not final"). AMC asserts that "agency 'interpretations' and other informal announcements [may]constitute[] final agency action subject to review [under] the APA."34 The cases it cites for thisproposition, however, are inapposite. In Independent Broker-Dealers' Trade Association v.Securities & Exchange Comm'n, 442 F.2d 132, 139-40 (D.C.Cir. 1970), for example, the courtfound that the SEC's statement of policy respecting customer-direct give-ups of brokerage feeshad led the stock exchange to abolish the give-ups. The court noted that the "elimination of [the] give-ups . . .confront[ing] appellants with pecuniary harm

was accomplished, not merely threatened. There was no means within the

administrative framework by which appellants could force the Commission to hold

further hearings on give-ups. As to them the Commission's action was effective

and final." Id.

34 Memorandum of Points and Authorities in Opposition to Motion to Dismiss at 26:13-16The court contrasted this situation with one in which the stock exchange had "refused to follow

the Commission's polities." Had the exchange elected to follow such a course, it stated, the

brokers "action would likely have been premature." Id. at 141. Here, unlike the plaintiffs in

Independent Broker-Dealers, AMC is "merely threatened" with harm. While AMC faces the

burden and cost of litigation, DOJ cannot force compliance with its interpretation of Standard

4.33.3 unless and until the court endorses that interpretation by issuing a final judgment in DOJ's

favor.

In another case cited by AMC, National Automatic Laundry and Cleaning Council v.

35 See Hurley Decl., Exs. G, H. Exhibit G, a letter directed to AMS, invites it to submitnew drawings and indicates that DOJ's counsel is willing to schedule a meeting to discuss thematter further. The letter concludes "If you do no contact me immediately to schedule a meetingtime and to commit to submitting such drawings by a date certain next week, the Departmentwill assume that you are unwilling to resolve the investigation through settlement at this time."(Id., Ex. G.)final actions, therefore are not reviewable, and we decline to consider them.")36

Thus, viewed separately or in combination, the matters AMC characterizes as final agency

action are not the kind of actions that are subject to judicial review under the APA.

D. No Other Adequate Remedy In A Court

Even if it is assumed that DOJ's amicus brief, correspondence with theater owners, and

threats of enforcement action are final agency action, AMC has an adequate remedy in that it may

assert violation of the APA as a defense to DOJ's enforcement action against it. See Jerry T.

nonrecoverable, which are normal incidents of participation in the agency process do not

constitute irreparable injury" and therefore do not "permit judicial intervention in the agency

process"). 36 The remaining cases cited by AMC are similarly distinguishable. See National UnionResources Defense Council, Inc. v. Environmental Protection Agency, 22 F.3d 1125, 1133(D.C.Cir. 1994) (the fact that a memorandum to regional EPA directors, a letter to the NationalResources Defense Council and a "Nitrogen Oxides Supplement to the General Preamble"published in the Federal Register "constitute[d] final agency action [was] clear from the EPA'ssubsequent conditional approval of non-I/M committal SIPs . . . under authority of thosedocuments" (emphasis added)); Southern California Aerial Advertisers' Ass'n v. Federal AviationAdministration, 881, F.2d 672, 676 (9th Cir. 1989) (a letter issued by an FAA official was "adefinitive statement of the FAA's position that had a direct and immediate effect on petitioner'smembers and that carried an expectation of immediate compliance with its terms. . . . Given thatpetitioner's members were expected to obey the rule set fort in the . . . letter as if it were law, theinformality of the letter does not undermine[it]. .."): Brown & Williamson Tobacco Corp. v.Federal Trade Commission, 710 F.2d 1165, 1170 (6th Cir. 1983), cert. denied, 465 U.S. 110(1984) (court held that the FTC's announcement of the results of a year-long study of tar andnicotine levels in Barclay cigarettes constituted final agency action, since "the FTC also halted thetesting of Barclay cigarettes, stated that it would refuse to publish any 'tar' or nicotine contentfigures for Barclay, and amended the 1981 Report which lists Barclay as a 1 mg. 'tar' cigarette.As a result, it would now appear to be inappropriate for Brown & Williamson to continue to citethe figures in the 1981 Report in its Barclay advertisements. Although the FTC did not orderBrown & Williamson to desist from making the 'ultra-tow tar' claim in its advertisements forBarclay, that is the effect of the action taken..."). AMC argues that such a view "ignores the practical consequences" of DOJ's conduct. It

asserts that DOJ's press releases regarding this litigation threaten to harm its business reputation

irreparably and leaves the entire theater industry in a state of uncertainty as to the applicable law.

AMC has proffered no evidence that it has suffered actual harm to its business reputation as a

result of publicity surrounding the filing of this action. Compare San Antonio Community

frequently handled requests for discovery in a manner similar to that prescribed in Rule 56(f):

they have required that the party asserting jurisdiction be permitted to conduct discovery to obtain

37 Abbott Laboratories is similarly distinguishable. There, the FDA published regulationsthat required the plaintiff manufacturer to "change all [of its] labels, advertisements andpromotional materials" immediately. Abbott Laboratories, supra, 387 U.S. at 1517. Here, bycontract, DOJ's position respecting Standard 4.33.3 has no legal effect unless and until the courtenters a judgment enforcing it.facts supporting its position, at least where such facts are peculiarly within the knowledge of the

1983), aff'd, 749 F.2d 1378 (9th Cir. 1984). At the August 9, 1999, hearing on this motion, the

court determined that AMC should have an opportunity to conduct further discovery on the issue

of final agency action38 Accordingly, it continued the hearing to September 8, 1999.

On August 27, 1999, AMC filed a supplemental declaration proffering the additional

evidence it had been able to obtain concerning DOJ's action. AMC asserted that DOJ had refused

to produce the majority of the documents it had requested, had raised a work product privilege in

response to numerous requests, and had objected on the basis that discovery was stayed.39 DOJ

countered that it had certified to AMC that it had had communications with less than ten of the

fifty largest theater owners in North America.40 DOJ also certified that none of the ten was the

largest theater owner.41 With three exceptions, the information provided by DOJ did not specify

which theater owners had been contracted. The three owners identified include AMC and

38 Because one aspect of the parties' dispute centered on the number of theaters to whomDOJ had communicated a demand that it comply with the interpretation of Standard 4.33.3 setforth in the Lara brief, the court suggested that DOJ identify the theaters that were currently underinvestigation or that had been sent such a communication. Counsel for DOJ responded that shewould do provide this information if AMC specifically requested it and if the disclosure wouldnot waive the Department's investigative process privilege. (See August 9, 1999 HearingTranscript of Plaintiff's Motion to Dismiss Defendant's Counterclaim, 34:21-35:1.) The courtthen stated: "At a minimum, . . . the Department could certify under oath in some fashion, whether in response to an interrogatory or otherwise, that it had communicated with [some number of] theater owners across the country with respect to the issues that are involved in this litigation." (Id. at 35:5-9 (emphasis added).)This latter approach was apparently that the department ultimately adopted. 39 Supplemental Declaration of Gregory F. Hurley Regarding United States' Responses ToDiscovery, 6-8. 40 Supplemental Declaration in Support of the United States' Motion to DismissDefendants' Counterclaim, ¶ 6. 41 Id.Cinemark USA, who are among the ten largest theater owners in the nation, and SoCal Cinemas,

which ranks 38 of 50.42

The additional evidence proffered by AMC is not sufficient to demonstrate that DOJ has

taken an industry-wide position like that the agency in National Union Automatic Laundry took

by sending an opinion letter to an industry trade association. See National Union Automatic

Laundry, supra, 443 F.2d at 701-02. To the contrary, the evidence before the court suggests that,

at most, DOJ has communicated with ten members of the theater industry nationwide, and has not

sought to press its interpretation of Standard 4.33.3 uniformly even among the largest owners.

Consequently, the court concludes the evidence does not establish that DOJ has engaged in final

agency action.

It is clear, however, that the parties dispute the proper scope of discovery on this issue and

that multiple discovery matters remain to be resolved. As a result, while DOJ's motion to dismiss

AMC's counterclaim must be granted, the order of dismissal is without prejudice to AMC's right

to seek leave to reassert the counterclaim at a later time should it develop, through discovery or

otherwise, evidence of final agency action that satisfies the legal standards discussed herein.

II. CONCLUSION

AMC's counterclaim is dismissed on the basis that the court lacks subject matter

jurisdiction over it. This dismissal is without prejudice to AMC's right to seek leave to reassertthe counterclaim should it develop evidence of final agency action meeting the standards set forth

Defendants are entitled to discovery pursuant to Interrogatories 6 and 7, subject to Plaintiff's

Defendants are not entitled to information regarding communications between Plaintiff andmovie theater representatives which would reveal Plaintiff's negotiating positions and statementsmade during settlement negotiations.

To the extent that there may be documents which are not protected by the Settlement NegotiationPrivilege, but that arguably may fall under the Law Enforcement.Minute OrderFebruary 25, 2000Page Two_________________

Investigative Privilege, Plaintiff has not persuaded the court that such privilege should beinvoked to deny Defendants' Motion to Compel. If Plaintiff seeks protection from discoverypursuant to the Law Enforcement Investigative Privilege, supplemental briefing is requiredsufficient to warrant the applicability of the doctrine to the Department of Justice in this civilmatter.

Plaintiff is not excused from production of information pursuant to interrogatories 6 and 7

insofar as they relate to the A.D.A. "Information Line." Defendants are entitled to discovery ofthe content and identities of persons participating in all discussions "with any movie theatercompany or operator, or industry representative, or any agents of the foregoing, in whichADAAG section 4.33.3 and/or lines of sight were discussed".

However, plaintiff need not interview Information Line personnel in order to comply with thisOrder. Any extant documents shall be produced.